Treasury lays down challenge for SA’s ‘unsustainable economic trajectory’

The strategic economic plan released for comment by National Treasury this week opens with an unambiguous statement:

“South Africa’s current economic trajectory is unsustainable.”

While this shouldn’t come as news to too many people, it is a telling way to begin a document like this. It is not so much a statement of fact as a challenge.

South Africa has presented many macroeconomic plans in the past. Many of them have been extremely good, as this one is. The problem, however, has always been in the execution.

Treasury’s document itself acknowledges this. It states that the major reforms it is proposing are drawn from the National Development Plan (NDP), which was released in 2012. That there has been a lack of execution on the NDP in the past seven years is explicit.

Time to act

The first part of Treasury’s challenge, therefore, is to the rest of government. Will the cabinet and government departments accept that the proposals Treasury has presented are the only credible way forward?

The plan states: “The government should urgently implement a series of reforms that can boost South Africa’s growth in the short term, while also creating the conditions for higher long-term sustainable growth. The specific and detailed reforms outlined here demonstrate that the only way to raise South Africa’s potential growth is through the implementation of a series of deliberate and concerted actions across a range of fronts.”

It is also no longer any good just agreeing with Treasury in principle. The only response that matters will be the action that follows.

Stakeholders

The second part of Treasury’s challenge is to the other two critical stakeholders in the process – business and labour. Will they get behind these reforms and play the roles that they must in order for them to succeed?

“It talks of a social compact in which government is providing an enabling environment, and in which the private sector must stand up for the social good beyond its own narrow self-interest when dealing with government policy requests,” notes Intellidex analyst Peter Attard Montalto.

This is not about summits and councils and delicately managed compromises. It is about just getting on with it.

There is no scenario under which South Africa reforms its economy by keeping everybody happy all of the time, and there is therefore no point in trying to manage it that way. What is required is for all parties to acknowledge the need for reforms and support their implementation, but to continue to argue their individual causes as the process unfolds.

The intention must not be disruption, but to hold the government to account at every step. That is how a robust democracy works, and how the best solutions ultimately prevail.

‘Banish hesitation’

Treasury’s final challenge is to the rest of society. It is effectively asking: ‘So, who is with us?’.

As Attard Montalto argues, it is a political statement as much as anything else.

“We view this paper as drawing fault lines around evidence-based policy and leadership in getting reform done,” he notes. “The language is hard-hitting and frank, and it exudes a can-do attitude – asking simply how to get faster growth.”

This is not just a challenge to the factions within the ANC, but to every South African. The proposed reforms are not going to please everyone, but what is your vision for this country if you are not going to support them?

A plan with ‘disruptive purpose’

“This paper is going to cause political fall-out, but we think that is its disruptive purpose,” says Attard Montalto. “And if it can mobilise and solidify a more robust evidence-based debate on policy – lacking in so many forums, such as Nedlac – as well as additional pressure from business on the president for reform, then it will have been a success.”

Business Unity South Africa (Busa) has already been quick to announce its backing. “The opportunity for reform is very short,” notes Busa president Sipho Pityana.

“It is critically important that we banish hesitation in our quest to set South Africa on an inclusive and sustainable growth path.”

That neatly summarises the response it would appear Treasury is hoping for – an eagerness to get on with it.

But if anyone has better ideas, they are welcome to tell National Treasury about them. Public comment on the plan is invited until September 15.

Brought to you by Moneyweb